The Delhi High Court on Tuesday observed that online lending platforms, offering short-term personal loans through mobile apps, cannot be allowed to charge exorbitant interest and processing fees.
“Rate of interest should not be exorbitant. Just look at the difficulties. An expert body is required. If you people are so slow in taking action, we will do it with our order with the help of an expert committee,” a bench of Chief Justice D.N. Patel and Justice Jyoti Singh said, while asking the Centre and Reserve Bank of India (RBI) to look into the issue.
The High Court said it expects that the Centre and RBI will come out with some solution by the next date of hearing on August 27. The court was hearing a petition seeking regulation of online lending platforms through mobile apps.
RBI ducks responsibility
The RBI said it regulates banks and non-banking finance companies and it does not regulate online lending platform and that the Central government has the power to do so.
The petitioner, Dharanidhar Karimojji, claimed that more than 300 mobile applications are providing instant loans ranging from ₹1,500 to ₹30,000 for 7 to 15 day periods.
The petitioner said these money lending platforms deduct almost 35% to 45% of the loan as platform fees, service charges or processing fees and only transfer the remaining money to the borrower's bank accounts.
The plea claimed these entities charge exorbitant interests rates of 1% or more per day. And in the event of non-payment or delay in repayment of the loaned amount, these entities even call up everyone on the borrower’s contact list to humiliate and harass them into making payments, the petitioner said.
The plea sought directions to regulate and control working of online digital lenders and to stop them from charging exorbitant interest.
